Taking clients, suppliers, or contacts out for a meal or drinks? These costs can be confusing. But here’s what matters if you operate through a limited company.
Can you claim entertainment as a tax deduction?
No. Entertainment costs (e.g., meals, drinks, gifts, hospitality for clients or suppliers) don’t count towards corporation tax relief. They’re ignored when calculating your company’s taxable profits.
So why can you still do it?
Even though entertainment costs don’t reduce profits for tax purposes, your company can still reimburse them tax-free, as long as they were spent ‘wholly, exclusively and necessarily’ for the business.
That means it’s more efficient to have your company reimburse you rather than paying from your after-tax salary.
Could you be saving more on tax?
Real-world example:
Say your annual sales are €80,000 and your deductible expenses (excluding entertainment) are also €80,000.
– You add €2,000 in entertainment costs.
– These entertainment costs are ignored for tax purposes, leaving only €78,000 in deductible expenses.
– Your taxable profit becomes €2,000, and you pay around €250 in corporation tax (at 12.5%).
In this case, the company still pays corporation tax, but you save more overall than if you’d paid the cost personally.
We can help you check if you’re getting the full benefit from your expenses – and make sure nothing’s slipping through the cracks.
Rules to follow
– Only legitimate business-related entertainment counts—no personal or social outings.
– Always keep documentation: who was there, the purpose, and proof of payment.
– Keep any emails, receipts, or notes in case of review.
Staff entertainment – the only exception
Staff entertainment costs (like a Christmas party) do qualify for corporation tax relief.
Only if:
– It’s open to all direct employees, and
– The cost is reasonable.
Note: if you’re a contractor with no additional employees, this doesn’t apply to you.
Need help?
If you’re unsure what counts as a legitimate business entertainment cost, or how to claim it properly, Fenero is here to help.
For clear, tax-efficient guidance, contact us on hello@fenero.ie or 01-6877400.
